Policy paper

Extension of offshore time limits for Income Tax, Capital Gains Tax and Inheritance Tax

Published 6 July 2018

Who is likely to be affected

This measure will only have an impact on individuals, trustees or others liable to Income Tax, Capital Gains Tax or Inheritance Tax on offshore income, gains or chargeable transfers who have made errors that are not deliberate or otherwise covered by the longer 20 year assessment time limit.

General description of the measure

This measure increases the tax assessment time limit for non-deliberate offshore non-compliance. The time limit will be increased to 12 years for Income Tax, Capital Gains Tax and Inheritance Tax. This increases the existing time limits of 4 years, or 6 where the loss of tax is due to carelessness, after the end of the year of assessment (or date of the chargeable transfer) to which it relates.

Where the taxpayer has sought to deliberately evade tax, the time limit will remain 20 years.

Policy objective

The government is determined to ensure that all UK taxpayers pay the tax they owe, and that offshore non-compliance is identified and investigated before assessment time limits expire. The extended time limits will provide HMRC with more time to access the information needed to understand offshore transactions, calculate the tax due, detect any errors and ensure the correct Income Tax, Capital Gains Tax or Inheritance Tax is paid.

This measure will help HMRC ensure everyone pays all the tax they owe, and addresses the risk that some taxpayers avoid a full investigation or assessment because of the time taken to gather facts on offshore structures and investments, which may not have been declared for many years, and can be very complex.

Background to the measure

The government announced that the assessment time limit for non-deliberate offshore tax non-compliance will be increased to at least 12 years at Autumn Budget 2017.

HMRC issued a public consultation on the details of this reform on 19 February 2018. This consultation closed on 14 May 2018. The response to the consultation and the draft legislation were published on 6 July 2018.

Detailed proposal

Operative date

These amendments will have effect in relation to Income Tax and Capital Gains Tax assessments from 2013 to 2014 in cases where the loss of tax is brought about carelessly, and from 2015 to 2016, and subsequent years, for other cases (where not already subject to the 20 year time limit). They will apply for Inheritance Tax to chargeable transfers taking place on or after 1 April 2013 where the loss of tax is brought about carelessly, and 1 April 2015 for other cases not subject to a longer time limit. The amendments will have effect when Finance Bill 2018-19 receives Royal Assent.

Current law

The existing time limits are set out in Part IV of the Taxes Management Act 1970 for Income Tax and Capital Gains Tax, and in Part VIII of the Inheritance Tax Act 1984 for Inheritance Tax.

Proposed revisions

Legislation will be introduced in Finance Bill 2018-19 to amend the Taxes Management Act 1970 through the insertion of a new section 36A, and the Inheritance Tax Act 1984 will be amended through the insertion of a new section 240B.

These amendments will provide for extended time limits where offshore Income Tax, Capital Gains Tax or Inheritance Tax is lost. Taxpayers’ appeal rights are unaffected.

Summary of impacts

Exchequer impact (£m)

2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
-	negligible	negligible	negligible	+5	+10

These figures are set out in Table 2.1 of Autumn Budget 2017 as ‘Offshore Time Limits: extend to prevent non-compliance’ and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2017.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure will only have an impact on individuals with offshore income, gains or assets who have made non-deliberate errors. These individuals may receive an assessment of tax as a result of the increase of the time limit to 12 years. There will be a negligible impact on individuals and households.

This measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

It is expected that any groups affected by the extended time limits are likely to have above average wealth. The government does not anticipate there will be adverse impacts on any group sharing protected characteristics.

Impact on business including civil society organisations

This measure will impact on businesses with offshore income, gains or chargeable transfers who have made non-deliberate errors. Businesses and individuals may receive an assessment of tax as a result of the increase of the assessing time limit to 12 years. This measure is expected to have a negligible impact on business admin burdens as statutory record-keeping requirements remain unchanged.

Organisations will need to determine how long they should hold on to information in light of the new time limits and will need to have robust data protection policies whether they hold information for 4 years, 20 years or any period in between.

One-off costs may include familiarisation with the new rules. On-going costs may include additional interaction with HMRC as a result of the increased time limit.

There is no impact on civil society organisations.

Operational impact (£m) (HMRC or other)

This measure is expected to have negligible operational costs to HMRC.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be kept under review through communication with affected taxpayers and practitioners.

Further advice

If you have any questions about this change, contact Sarah Weston by:

• telephone: 03000 589165
• email: [email protected]